Delhi HC Ruling Sparks Seismic Shift: Stock Exchanges and Market Entities Face Potential RTI Scrutiny

Delhi HC Ruling Sparks Seismic Shift: Stock Exchanges and Market Entities Face Potential RTI Scrutiny​

A landmark ruling by the Delhi High Court designating the National Stock Exchange (NSE) as a 'public authority' under the Right to Information (RTI) Act is set to send ripples through India’s financial landscape. Legal experts suggest that the reasoning behind this judgment extends far beyond the nation's largest exchange, potentially encompassing all regulated market infrastructure institutions (MIIs).

The decision has ignited intense discussion among legal professionals regarding the applicability of RTI across various entities in the securities market. Questions now surround whether similar logic applies to other stock exchanges, clearing corporations, and depositories that operate under strict regulatory oversight.

Defining Public Function: NSE's Status Under RTI Act​

Stock exchanges have traditionally argued that they function as private companies, positioning themselves outside the ambit of the RTI Act. The Delhi High Court countered this view by observing that an exchange cannot operate without recognition from SEBI under the Securities Contracts (Regulation) Act (SCRA).

The court specifically noted the extensive regulatory and supervisory control exercised by the Central Government and SEBI over these exchanges. Based on these factors, the ruling held that NSE discharges public functions and must therefore be treated as a public authority under RTI.

Broader Implications for Regulated Market Institutions​

Suhas Tuljapurkar, who served on SEBI's Data Advisory Committee, indicated that if the principle of regulatory oversight dictates inclusion, the implications could expand across multiple sectors. He noted that this logic might extend beyond the securities market to entities regulated by other bodies like RBI, IRDAI, CERC, PNGRB, and RERA.

Within the securities sector specifically, Tuljapurkar stated the impact could affect stock exchanges, clearing corporations, depositories, registrars and transfer agents (RTAs), mutual funds, AIFs, and proxy advisory firms. This suggests a wide-ranging scrutiny for nearly every entity operating in this domain.

Depositories and Market Infrastructure Under Microscope​

Neeha Nagpal of N & Company Legal confirmed that the judgment's reasoning is not restricted to NSE alone. She explained that the court based its decision on two critical pillars: the necessity of recognition under Section 4(3) of the Securities Contracts (Regulation) Act and SEBI’s deep, pervasive control over these entities.

According to Nagpal, this structural framework applies equally to BSE, depositories like CDSL and NSDL, and clearing corporations. She added that the case is particularly strong for depositories, as they hold dematerialized securities and operate under extensive SEBI oversight.

Balancing Transparency with Market Integrity Concerns​

Legal practitioners who view the ruling positively state that future litigation involving similar entities could rely on these principles if those institutions discharge functions integral to the securities market. If upheld by higher courts, stakeholders may seek information relating to regulatory processes and governance decisions.

However, experts caution that any expansion of the RTI framework must strike a careful balance between transparency and protecting sensitive market data. Tuljapurkar warned against exposing confidential information that could undermine market integrity. He stated that without proper oversight from governing boards and SEBI, "everyone's shareholding can soon be found on the dark web."